Oil prices extended their two-day winning streak on Wednesday, posting slight gains as the dollar weakened, while investors awaited more inventory data for clearer cues on demand trends.
Brent crude futures rose 17 cents, or 0.2 per cent, to $83.86 a barrel by 0740 GMT, after gaining 3.3pc in the previous session.
US West Texas Intermediate (WTI) crude futures climbed 31 cents, or 0.4pc, to $77.45, after adding 4.1pc in the previous session.
Oil benchmarks are expected to retain support after Federal Reserve Chair Jerome Powell sounded less hawkish on interest rates than markets had expected, while the latest data showed US crude inventories fell despite earlier expectations of a climb.
“The improved risk sentiment in the aftermath of Fed Chair Jerome Powell’s comments, along with a weaker US dollar, seem to be tapped on for some upside in oil prices, after seeing a lacklustre performance since end-January,” said IG’s market analyst Yeap Jun Rong.
“The reservation is that the overnight downside reaction in the US dollar has been more measured as compared to before,” said Yeap, adding that any continued recovery in the dollar could still serve as a headwind for oil prices.
The dollar index was down slightly on Wednesday, extending losses after Powell’s comments on Tuesday, making oil cheaper for those holding other currencies.
With less aggressive interest rate hikes in the United States, the market is hoping the world’s biggest economy and oil consumer can dodge a sharp slowdown in economic activity or even a recession and avoid a slump in oil demand.
“I think we’re in a reasonably balanced market,” said Westpac senior economist Justin Smirk.
“If we have stronger than expected growth out of the developing world, (oil) prices will be firmer and Opec will have to step up output. That’s not our core view. We don’t see a big surge in demand,” he said.
Supporting the market, weekly inventory data from the American Petroleum Institute industry group showed crude stocks fell by about 2.2 million barrels in the week ended Feb 3, according to market sources.
That defied expectations from nine analysts polled by Reuters, who had estimated crude stocks grew by 2.5m barrels.
However, gasoline and distillate inventories rose more than expected, with gasoline stocks up by about 5.3m barrels and distillate stocks, which include diesel and heating oil, up by about 1.1m barrels.
The market will be looking to see if data from the US Energy Information Administration, due at 1530 GMT, confirms the decline in crude stocks.